ISTANBUL/ANKARA, Oct 27 (Reuters) - Iraqi Kurdistan plans to
increase the capacity of its oil pipeline via Turkey to 700,000
barrels per day (bpd) following upgrade work, industry sources
and officials said on Monday

It will raise the flow to 400,000 bpd by year-end, from a
current 280,000 bpd, adding further pressure to falling world
oil prices already hit by rising supply.

The Kurdistan Regional Government (KRG) has quietly pressed
ahead with plans to expand oil pumping capacity in the teeth of
opposition to its oil exports from the Baghdad government and as
it fights Islamic State militants.

"There is further technical upgrade work ongoing right now
and once that is finished, the pipeline capacity will reach its
designed volume which is 700,000 bpd," one industry source said.

"I believe the work will be completed in two to three
weeks," the source said.

KRG's pipeline to the Turkish port of Ceyhan, first began
operating at the start of this year, angering the central
government in Baghdad which claims the sole authority to manage
Iraqi oil.

Baghdad, which claims the Kurdish oil shipments are illegal,
has taken its refusal to allow Kurdish oil shipments to U.S.
courts, blocking the discharge of one tanker off Texas earlier
this year.

KRG argues that its shipments are allowed under the Iraqi
constitution.

A total of 19.2 million barrels of oil have been exported
via Ceyhan, Turkish officials said, and around $400 million has
been deposited with Turkish state lender Halkbank as a result.

The KRG has declined to say who is helping it arrange the
deals.

In September, Reuters reported that at least 3 million
barrels of Kurdish oil were on ships heading to Asia, with trade
sources naming China as a possible destination.

Despite the mystery over buyers, an order book for Kurdish
oil seems to have been established. At least two tankers per
week were regularly lining up at Ceyhan to load Kurdish crude,
Turkish officials and industry sources said.

Oil production in northern Iraqi oilfields has been on the
rise, but for now there has not been enough crude to fill the
upgraded capacity of the pipeline.

"We are likely to see 400,000 bpd flowing in the pipeline
probably before the end of the year," another industry source
said.
(Reporting by Humeyra Pamuk and Orhan Coskun; Editing by Nick
Tattersall, Veronica Brown and William Hardy)